eds. DiMatteo & Hogg, Comparative Contract Law (OUP, 2015)
17 Pages Posted: 2 May 2016
Date Written: April 29, 2016
This chapter first identifies three features of standard form contracts that challenge the classical theory of contract: standard terms lack of salience, consumers lack practical choice over such terms, and the scale of standard terms across an industry renders bilateral agreements a form of mass private regulation. After offering a descriptive overview of American treatment of standard terms, the chapter reviews how scholars have thus far conceptualized the challenge of standard terms. We have seen the lenses of consent, cognitive error, market failure, substantive unfairness and democratic degradation. Each view identifies an important concern but also suffers from some limitation in its accounting of the problem. The chapter builds off these theories to propose an alternative framework: Standard terms create cumulative externalities that implicate the public interest in ways that are not easily taken into account in the course of resolving bilateral disputes. We need legislative action that not only disallows an inevitably limited set of standard terms but also empowers courts to take into account certain externalities in the way contracts are read and enforced. For example, the scope of evidence considered relevant to contract adjudication and the interpretive defaults used to read contracts should be adjusted so that courts are in a position to limit the cumulative negative externalities of standard terms.
Keywords: standard form contracts, boilerplate, standard terms, negative externalities
JEL Classification: D11, D18, K12
Suggested Citation: Suggested Citation
Bagchi, Aditi, At the Limits of Adjudication: Standard Terms in Consumer Contracts (April 29, 2016). eds. DiMatteo & Hogg, Comparative Contract Law (OUP, 2015); Fordham Law Legal Studies Research Paper No. 2772733. Available at SSRN: https://ssrn.com/abstract=2772733